SAN FRANCISCO -- HP said it is seeing a shift in the way
CIOs are handling their IT departments, one that empowers network
administrators and points to consolidation as an on-ramp to virtualization.

Whereas traditional applications were separated into distinct silos, such customer relationship management and Web services , the Palo Alto, Calif.-based systems vendor said it is
approaching companies and organizations in all stages of development with
its Adaptive Enterprise strategy.

To wit, the company has set a roadmap that customers can use to move from a basic virtualization environment all the way to a complete IT utility.

The concept, according to Steve Fink, HP director of IT consolidation, and
Nick van der Zweep, HP director of virtualization and utility computing, is
to combine networks internally and take back the power currently farmed out
to external service providers.

"When we have these chats with CIOs, the conversation used to be more
about features and performance. Now it is more about economics and
politics," Fink told internetnews.com during a briefing with company
executives here. "Instead of looking at cutting costs and consolidation,
they are looking at what they can do to prepare for the future and in a
sense, transform the IT department into an internal service provider. First
step customers are saying they need a sub-second response infrastructure
that is much more competitive than the rest of the marketplace."

HP is not the only vendor on the block talking about virtualization of
desktop, server and storage resources. IBM, Sun Microsystems, Microsoft,
VERITAS, Oracle, Dell and others are all working on selling their solutions
to the problem of under-utilization.

According to statistics from analyst firm Gartner, 90 percent of CPU and
I/O capacity in 1-way and 2-way servers running on Windows/Intel is not
being used.

"Using virtualization software, overall savings in a Windows environment
is at 37 percent," Gartner Server Strategies analyst Tom Bittman told
internetnews.com. That is huge. If I have a $3 million dollar
project, I can use that extra million to pump back into the business. We're
not talking about shattering changes, just changes in old paradigms."

Bittman also said Gartner found that virtualization software is helpful
in UNIX and mainframe environments. The firm believes that in 5 to 6 years,
the UNIX world alone could save 13 percent of their budgets using automation
software.

The effect also impacts hardware and software spending habits. Bittman estimates UNIX hardware spending will decrease 11 percent, with an increase in software spending by 21 percent. The Windows/Intel environment is more dramatic with hardware spending expected to drop 21 percent and software spending to jump up 50 percent.

Using a combination of HP hardware and software such as HP Systems
Insight Manager, Open View and Open Call, van der Zweep said IT departments
can move resources where and when they are needed, either as a back-up or as
a redundant system.

"We're expecting to increase data utilization rates by a factor of
three," van der Zweep said. "We want to work with these customers and allow
them to take back their systems."

HP said it has learned many lessons as a part of its own merger with
Compaq Computer and is still in the process of moving things around.
Starting May 1, the company will be consolidating its HP Services division along
with its Business Critical Systems, Industry Standard Servers and Network
Storage Solutions divisions. into one global business unit.

Fink and van der Zweep said it is now working with customers like Philips
Semiconductor -- a subsidiary of Philips Electronics -- on
test projects, which could lead to larger contracts.

"We got the CEO of Philips Semi in charge of the project and he told us
that if we worked over their analog division and digital division and did
well... that would get the whole company behind this," van der Zweep said. "At one
point, we stopped the project because they wanted to just get the technology
and plug it in. We told them that if we didn't talk about their goals and
processes, then this would fail."

HP said it has several similar projects in the pipeline and expects to
announce what it calls "important new customer wins" in the coming weeks.